At last – MHCLG is taking a serious look at the merits of the introducing a new Equity Loan Scheme. H2B2 you might say – a new scheme targeted only at FTBs, part-funded by housebuilders, and with safeguards to ensure the benefits arising from the inevitable increase in supply, will be distributed equitably.
Music to the ears of the housebuilding sector, but hopefully not the limit of the MHCLG ambition. New reforms are also needed (a) stimulate the delivery of affordable homes given the financial constraints on housing associations, and (b) provide housebuilders with much needed flexibility to amend unviable planning permissions to enable them to come forward and deliver new homes.
Support for FTBs
In this regard HMG should quickly get behind the HBF’s proposals for a developer-funded Equity Loan Scheme. It provides customers with a 20% equity loan funded by combination of HMG investment and a fee paid by the housebuilder. HMG would retain the equity stake which, on the basis of Help to Buy, would deliver a significant profit within a few years, once the loan is repaid. It would be for FTBs only.
Such a scheme will supplement the buyers deposit and thereby reducing the size of the LTV ratio, and enabling far more FTBs to gain access to lower cost mortgage products. And massively reducing the deposit burden on FTBs who don’t access to a bank of mum and dad.
The benefits for FTBs and UK plc would be enormous. With a larger and more predictable pool of FTBs, housebuilder confidence, especially for SMEs, would rise massively. Releasing funds for investment in more land, more outlets and more volume via accelerated build rates. Let’s remember that volume doubled during the life of Help to Buy and 375,000 families were helped into their home ownership dream. Not to mention the jobs and GDP benefits – the 2013-23 H2B has yielded a £1.5bn (and rising) profit for HMG.
Affordable Housing Cascades
The second reform should be a clear national policy statement requiring LPAs to support a cascade approach to discounted market sale homes. HBF estimates that over 700 schemes are stalled because new affordable homes, slated in the S106 for rent, but cannot be transferred on acceptable terms due to the reluctance of RPs to invest. Thousands of homes for families, remaining unbuilt, despite huge demand from aspiring owner-occupiers. Allowing these homes to be switched to DMS will keep sites moving, get others started, and provide a practical route into home ownership at zero cost to HMG.
The case for flexibility is compelling. Research by Savills in 2024, which is currently being updated, showed that 730,000 households, currently residing in the PRS, and comprising 43% of all PRS tenants, could afford a DMS home if offered at a 30% discount. Many of those will currently be claiming housing benefit from the state. Importantly, if they switched to owning a DMS home, the discount they receive will be maintained in perpetuity. Thereby guaranteeing that the home contributes to meeting affordable housing need forever – unlike shared ownership or shared equity. Repeated studies have shown the physical, mental and financial benefits of a housing career in home ownership vs the PRS. Two thirds of renters want to own, according to the English Housing Survey.
Stalled Sites Recovery Mechanism
The final reform should be a national fast-track route for stalled housing sites. A streamlined mechanism to restart schemes that have demonstrably stalled because of changed market conditions which have rendered elements of the consent undeliverable. Creating a new opportunity for housebuilders to apply to amend an unviable planning consent and receive a decision within 6 weeks. No decision = default ‘Yes’.
Such a bold a positive proposal would need safeguards:
- The flexibility to amend the consent would be restricted to a specific list of issues which do not go to the fundamental acceptability of the consent. So, matters such as housing mix, tenure, infrastructure payment triggers, phasing, home size/typology, density, materials, and indexation.
- It would be a temporary kick-starting scheme, perhaps limited to 24 months in operation.
- It would only apply to schemes which have demonstrably stalled due to market change and been stalled for a minimum of 12 months. As demonstrated by pre and post viability evidence
- The flexibility to amend the permission would expire if the stalled scheme has not been restarted on site within 12 months of the new consent.
The prize would be enormous – many hundreds of thousands of homes are currently stalled, with each one representing a family who should have a home but hasn’t. Each one a permission where the principle of housing is accepted but where current market conditions mean that the details are preventing delivery.
